Tekniska verken i Linkoping AB

The dividends and large capex program will lead to negative discretionary cash flow, and we estimate a debt increase to about SEK3.0 billion at end-2021, up from about SEK2.4 billion at year-end 2019. Positively, we expect the higher investment in TvAB's wind and hydro business will push the company's EBITDA generation above SEK100 million in 2020 from about SEK20 million in 2018. The stable outlook on TvAB reflects our view that the company's fully regulated electricity distribution business and stable district heating operations will likely continue to support the company's cash flows. We expect the company will maintain S&P Global Ratings-adjusted FFO to debt above 45% in the next couple of years, well above the 35% threshold for the ratings.

...We expect credit ratios to weaken slightly in 2020-2022, but credit headroom to remain. We expect TvAB's credit ratios to remain comfortable for the rating, with FFO to debt above 45% in 2020-2022. This is well above our downside rating threshold of 35%. TvAB's large capex program and dividends will contribute to debt build-up during 2020 and 2021, which the company will use to finance its transformation to 100% renewable production.We expect TvAB's new strategic plan will require an increase in capex, with forecast annual investment levels of Swedish krona (SEK) 1.5 billion in 2020 and 2021, up from SEK900 million in 2018. TvAB will require this increased investment to align with the City of Link÷ping's target of self-sufficient power generation by 2025, with 100% renewable power generation by 2040. Additionally, dividends will increase TvAB's debt. We expect the company to pay extraordinary dividends totaling SEK350 million from 2018-2020, in addition to the annual dividend of SEK187...

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